10-Q: Rigetti Q3 2025: Net Loss Widens Amidst Warrant Volatility

Rigetti Computing reports a significant increase in net loss for Q3 2025, primarily driven by a substantial change in the fair value of derivative warrant liabilities, despite strategic investments and technology milestones.

Summary

• Net loss for the three months ended September 30, 2025, was $201.0 million, compared to $14.8 million for the same period in 2024.
• Net loss for the nine months ended September 30, 2025, was $198.0 million, compared to $48.0 million for the same period in 2024.
• Revenue decreased by 18% to $1.9 million for Q3 2025 and by 39% to $5.2 million for the nine months ended September 30, 2025, mainly due to reductions in collaborative research and professional services contracts.
• Gross profit decreased by 66% to $0.4 million for Q3 2025 and by 70% to $1.4 million for the nine months ended September 30, 2025.
• Research and development expenses increased by 18% to $15.0 million for Q3 2025 and by 22% to $44.0 million for the nine months ended September 30, 2025.
• A significant non-cash loss of $182.0 million for Q3 2025 and $149.3 million for the nine months ended September 30, 2025, was recorded due to changes in the fair value of derivative warrant liabilities, primarily driven by stock price fluctuations.
• Cash and cash equivalents decreased from $67.7 million at December 31, 2024, to $26.1 million at September 30, 2025, while available-for-sale investments (short-term) increased from $124.4 million to $420.9 million.
• The company completed a $350 million At-the-Market (ATM) offering during the nine months ended September 30, 2025, raising $346.7 million in net proceeds.
• A Collaboration Agreement with Quanta Computer Inc. was signed, with both parties committing to invest at least $250.0 million each over five years in quantum computing, and Quanta also made a $35.0 million private placement investment.
• Achieved a mid-year performance milestone of 99.5% median two-qubit gate fidelity on a modular 36-qubit system (Cepheus-1-36Q) and released it for general availability.
• Awarded a three-year $5.8 million contract from the Air Force Research Laboratory (AFRL) for superconducting quantum networking.
• Received purchase orders totaling approximately $5.7 million for two 9-qubit Novera quantum computing systems.
• The company will no longer qualify as a smaller reporting company (SRC) starting with its Q1 2026 10-Q filing, which is expected to result in increased compliance costs.

Sentiment

Score: 4

Explanation: While the company achieved significant technical milestones and secured substantial capital, the widening net loss driven by warrant revaluation and declining revenue/gross profit indicates ongoing financial challenges and volatility. The long-term outlook for quantum computing remains speculative.

Positives

• Achieved a mid-year performance milestone of 99.5% median two-qubit gate fidelity on a modular 36-qubit system (Cepheus-1-36Q), representing a 2x reduction in median two-qubit gate error rate from previous best results on the 84-qubit Ankaa-3 system.
• The Cepheus-1-36Q system has been released for general availability and deployed on the Cloud Services Platform (QCS) and Microsoft Azure.
• Secured a three-year, $5.8 million contract from the Air Force Research Laboratory (AFRL) to advance superconducting quantum networking.
• Received purchase orders totaling approximately $5.7 million for two 9-qubit Novera quantum computing systems.
• Entered into a Collaboration Agreement with Quanta Computer Inc., with both companies committing to invest at least $250.0 million each over five years in quantum computing.
• Quanta Computer Inc. made a $35.0 million private placement investment in common stock.
• Successfully completed a $350 million At-the-Market (ATM) offering, raising $346.7 million in net proceeds during the nine months ended September 30, 2025.
• Prepaid in full all amounts owed under the Amended Loan Agreement with Trinity Capital Inc. in December 2024, eliminating associated interest expense.
• Interest income significantly increased to $10.8 million for the nine months ended September 30, 2025, up from $3.6 million in the prior year, due to higher invested cash balances.
• All earn-out liabilities related to Sponsor Vesting Shares have been satisfied as of September 30, 2025, with the remaining liability balance at zero.

Negatives

• Net loss significantly widened to $201.0 million for Q3 2025 and $198.0 million for the nine months ended September 30, 2025, primarily due to a large non-cash loss from derivative warrant liabilities.
• Revenue decreased by 18% to $1.9 million for Q3 2025 and 39% to $5.2 million for the nine months ended September 30, 2025, mainly due to reductions in collaborative research and professional services contracts.
• Gross profit decreased by 66% to $0.4 million for Q3 2025 and 70% to $1.4 million for the nine months ended September 30, 2025.
• Operating loss increased by 18% for Q3 2025 and 24% for the nine months ended September 30, 2025.
• A non-cash loss of $182.0 million (Q3 2025) and $149.3 million (YTD Q3 2025) was recorded from the change in fair value of derivative warrant liabilities, driven by stock price fluctuations.
• The company was not initially selected for Stage B of the DARPA Quantum Benchmarking Initiative (QBI), though dialogue is ongoing.
• Revenue has been negatively impacted by the expiration of the National Quantum Initiative Act in September 2023 and its pending reauthorization.
• Will no longer qualify as a smaller reporting company (SRC) starting Q1 2026, which will result in increased legal, accounting, and financial compliance costs.
• Customer concentration remains high, with sales to government entities comprising 92.6% of total revenue for Q3 2025 and 91.4% for the nine months ended September 30, 2025.

Risks

• The need for successful development of products and the potential need for additional capital (or financing) in the future.
• Competition from substitute products and services from larger companies and the protection of proprietary technology and patent litigation.
• Dependence on key individuals and risks associated with changes in information technology.
• Unfavorable conditions in the industry, global economy, or global supply chain (including military conflicts, sanctions, trade protections, and tariffs).
• Macroeconomic conditions, including inflation, interest rates, financial and credit market fluctuations, government shutdowns, political turmoil, natural catastrophes, warfare, and terrorist attacks.
• The ability to accelerate development of multiple generations of quantum processors.
• Customer concentration and the risk that a significant portion of revenue currently depends on contracts with the public sector.
• The outcome of any legal proceedings that have or may be instituted against the company or others.
• The ability to execute on business strategy, including monetization of products, and to grow and manage growth profitably.
• The ability to maintain relationships with customers and suppliers and retain management and key employees.
• Costs related to operating as a public company, including additional costs associated with the pending loss of smaller reporting company (SRC) status.
• The time and attention necessary with respect to increased disclosure and compliance obligations associated with the pending loss of SRC status.
• The ability to maintain effective internal controls over financial reporting.
• Changes in applicable laws or regulations, including international trade policies and tax legislation.
• The possibility of being adversely affected by other economic, business, or competitive factors and the evolution of the markets in which the company competes.
• The ability to implement strategic initiatives, expansion plans, and continue to innovate existing products and services.
• The sufficiency of cash resources and the ability to raise additional capital when needed and on attractive terms.
• The success in retaining or recruiting, or changes required in, officers, key employees, or directors.
• Estimates regarding expenses, profitability, future revenue, capital requirements, and needs for additional financing.
• The ability or decisions to expand or maintain the existing customer base.
• Dilution to stockholders from the exercise of warrants, which would increase the number of shares eligible for future resale in the public market.
• The risk that warrants may expire worthless if the trading price of common stock is less than $11.50 per share.

Future Outlook

The company expects to release a 100+ qubit chiplet-based system with a 99.5% median two-qubit gate fidelity before the end of 2025. Development contracts are anticipated to remain a significant revenue source for several years as the company scales sales of QPUs and its Quantum Computing as a Service (QCaaS) business. The company expects to continue incurring losses for the foreseeable future due to ongoing investments in research, development, and infrastructure. Research and development expenditures are projected to grow, focusing on the technology roadmap and achieving broad quantum advantage. Future capital expenditures may significantly increase to upgrade the current chip fabrication facility and potentially invest in a new one. Selling, general and administrative expenses are also expected to rise long-term, especially after achieving quantum advantage, to enhance sales, expand the customer base, and implement new marketing strategies. Revenue timing and size are expected to fluctuate significantly. The company is committed to investing at least $250.0 million in quantum computing over five years as part of the Collaboration Agreement with Quanta.

Management Comments

• "We believe quantum computing represents one of the most transformative emerging capabilities in the world today."
• "Our long-term business model centers on revenue generated from sales of quantum processing units (QPUs) and quantum computing systems made accessible via the cloud in the form of Quantum Computing as a Service (QCaaS) products."
• "The substantial majority of our revenues are currently derived from development contracts, and we anticipate this market opportunity will continue to represent an important source of revenue for at least the next several years as we work to ramp up sales of QPUs and our QCaaS business."
• "We expect to continue to incur additional losses for the foreseeable future as we invest in research, development, and infrastructure consistent with our long-term business strategy."
• "Our goal for 2025 is to introduce the next generation of our modular system architecture, while continuing to increase fidelities."
• "We expect to release a 100+ qubit chiplet-based system with a 99.5% median two-qubit gate fidelity before the end of 2025."
• "We believe that our existing cash, cash equivalents and available for sale investments should be sufficient to meet our anticipated operating cash needs for at least the next 12 months based on our current business plan, and expectations and assumptions considering current macroeconomic conditions."

Industry Context

Rigetti Computing operates in the highly specialized and emerging quantum computing industry, characterized by intensive research and development and significant capital requirements. The company's vertically integrated approach, including its Fab-1 facility, aims to control the production of its quantum processors. The industry is currently heavily reliant on government funding and partnerships, as evidenced by Rigetti's high percentage of revenue from government entities (over 90%) and its contracts with AFRL and C-DAC. Key industry benchmarks include increasing qubit count and improving gate fidelity, where Rigetti has demonstrated progress with its 36-qubit Cepheus-1-36Q system achieving 99.5% median two-qubit gate fidelity. The collaboration with Quanta Computer Inc. and participation in initiatives like DARPA's QBI highlight the collaborative ecosystem and the ongoing race to achieve 'quantum advantage' over classical computers. The expiration of the National Quantum Initiative Act underscores the industry's sensitivity to government policy and funding cycles.

Comparison to Industry Standards

• Achieved 99.5% median two-qubit gate fidelity on its modular 36-qubit Cepheus-1-36Q system, representing a 2x reduction in median two-qubit gate error rate from its previous best results on the 84-qubit single-chip Ankaa-3 system. This fidelity is a critical performance metric in the quantum computing industry.
• The company's goal to release a 100+ qubit chiplet-based system with 99.5% median two-qubit gate fidelity before the end of 2025 sets a specific, competitive benchmark for its technology roadmap against other quantum hardware developers.
• The Novera QPU, a 9-qubit system, is being marketed, with recent purchase orders for two systems, indicating a commercial offering in the lower-qubit segment of the market.
• The collaboration with QphoX on the AFRL contract for superconducting quantum networking aligns with broader industry efforts to develop robust quantum interconnects and distributed quantum systems, a key area for scaling quantum computing.

Corporate Governance

Legal Proceedings

• The company is not currently a party to any material legal proceedings that, if determined adversely, would individually or taken together have a material adverse effect on its business, financial position, results of operations, or cash flows.

Related Party Transactions

• Earn-out liabilities related to Sponsor Vesting Shares, which were held by Supernova Partners II LLC (the Sponsor) and SNII's directors and officers (Sponsor Holders), were satisfied during the three and nine months ended September 30, 2025. The earn-out liability for the Sponsor Redemption-Based Vesting Shares was $10.4 million as of August 14, 2025, and for the Promote Sponsor Vesting Shares was $32.9 million as of February 6, 2025. All these liabilities have been satisfied, and the remaining balance is zero as of September 30, 2025.

Stakeholder Impact

• Shareholders face significant dilution from the At-the-Market (ATM) offering and warrant exercises, and increased volatility due to large non-cash warrant revaluation losses. Future capital raises could lead to further dilution.
• Employees benefit from increased R&D expenses and stock-based compensation, indicating continued investment in talent and efforts to remain competitive in the marketplace.
• Customers will benefit from the release of the Cepheus-1-36Q system for general availability and new contracts, signaling continued product development and service offerings.
• Creditors saw a reduction in financial risk with the full prepayment of debt to Trinity Capital Inc.
• Suppliers may see increased demand for materials and components if capital expenditures for chip fabrication facilities increase.

Next Steps

• Release a 100+ qubit chiplet-based system with a 99.5% median two-qubit gate fidelity before the end of 2025.
• Explore co-development of hybrid quantum computing systems with the Centre for Development of Advanced Computing (C-DAC).
• Continue collaboration with QphoX on the Air Force Research Laboratory (AFRL) superconducting quantum networking project.
• Maintain ongoing dialogue with DARPA regarding participation in Stage B of the Quantum Benchmarking Initiative (QBI).
• Invest at least $250.0 million in quantum computing over five years as per the Collaboration Agreement with Quanta Computer Inc.
• Quanta Computer Inc. will invest at least $250.0 million in personnel and capital expenditures for developing products and services and manufacturing capability in furtherance of Rigetti's product roadmap over five years.
• Potentially increase capital expenditures to upgrade the current chip fabrication facility and possibly invest in a new quantum chip fabrication facility.
• Enhance sales and service offerings, expand the customer base, and implement new marketing strategies, particularly after potentially achieving quantum advantage.
• Comply with increased legal, accounting, and financial compliance costs due to the loss of smaller reporting company (SRC) status starting with the Quarterly Report on Form 10-Q for the first quarter of 2026.

Key Dates

Recommendation

Rigetti Computing presents a mixed picture. On one hand, the company has demonstrated significant technological progress with its 36-qubit Cepheus-1-36Q system and secured substantial capital through an ATM offering and a private placement with Quanta. New contracts and partnerships also signal continued industry engagement. However, the financial results show a dramatically widening net loss, primarily driven by non-cash warrant revaluation losses, coupled with declining revenue and gross profit. The quantum computing industry is still in its early stages, highly speculative, and capital-intensive. While the company has sufficient liquidity for the next 12 months, its long-term profitability remains uncertain, and future capital raises are likely. The stock is highly volatile, as evidenced by the warrant revaluation impact. For a seasoned investor, the technological advancements and strategic partnerships offer long-term potential, but the current financial performance and inherent risks of a pre-profitability, high-tech venture warrant a 'hold' rather than a 'buy' or 'sell' at this stage, awaiting clearer signs of revenue growth and path to profitability. The significant non-cash loss from warrant revaluation, while not impacting cash directly, reflects substantial stock price volatility which is a key risk.

Keywords

Quantum computing, Superconducting quantum processors, QPU, QCaaS, Quantum technology, SEC filing, 10-Q, Financial results, Rigetti Computing, Ankaa-3, Cepheus-1-36Q, Qubit, Gate fidelity, Quanta Computer, AFRL contract, ATM offering, Derivative warrant liabilities, Earn-out liabilities, National Quantum Initiative Act